Sector-specific FDI caps to stay, Trai says

New Delhi: The Telecom Regulatory Authority of India, or Trai, has asked the government to maintain the current foreign ownership ceiling of 49% for cable operators such as Hathway Bhawani Cabletel Datacom Ltd and 74% for telecom operators such as Bharti Airtel Ltd that are seeking to offer Internet-delivered television services in the country.

Apart from TV signals, Internet protocol TV, or IPTV, services will include offerings such as video-on-demand and digital video recording.

In its recommendations submitted to Siddhartha Behura, secretary, the department of telecommunications (DoT), on Friday, the telecom regulator has backed an earlier government suggestion that Internet service providers (ISPs) launching IPTV services have a minimum net worth of Rs100 crore. Net worth is also referred to as shareholder equity and comprises a company’s equity and reserves.

Ashok Mansukhani, president, Multi Systems Operators Alliance, a trade body representing leading cable operators such as Hathway Datacom, and IndusInd Media and Communications Ltd said: “FDI (foreign direct investment) in the cable operators segment should be raised to 74% since it is a very capital-intensive business and we need a level-playing field.”

It is not mandatory that the government accept Trai’s recommendations and DoT has in the past rejected some proposals from the regulator, though on Friday there was no indication of DoT doing so with the IPTV suggestions.

Trai added in its recommendations that while telecom firms will be regulated as per the Unified Access Services Licence (UASL), cable operators will be governed by the Cable Television Network (Regulation) Act, 1995. A copy of the recommendations was also submitted to Asha Swarup, secretary in the information and broadcasting ministry.

Setting a Rs100 crore networth criteria for ISPs “will discourage new entrepreneurs and many smaller firms who want to enter into (IPTV services),” said Rajesh Chharia, president of trade group Internet Service Providers Association of India. He added that despite his firm CJOnline Ltd being keen to enter the IPTV market, the networth clause would?prevent it from doing so.

The regulator argued the Rs100 crore networth eligibility criteria was set by DoT in October. “Going forward, we could deliberate on whether this should be reduced or done away with,” said a senior Trai official, requesting anonymity. “DoT estimated working expenditure of IPTV business to be around Rs15-20 crore, and that’s where Rs100 crore in net worth came from.”

The regulator will separately recommend pricing of television channels offered through IPTV. “Pricing is an area of concern for us, and we are already working on it,” said the Trai official.

Meanwhile, the industry is all set to deliver IPTV services into millions of homes in the country (more than 70 million are estimated to be served by cable TV). Bharat Sanchar Nigam Ltd expects to cover 55 cities with its IPTV service by June and sign up a million customers by the year-end. Reliance Communications Ltd said in November that it intends to roll out IPTV services in early 2008 and rival Bharti Airtel, which is testing its IPTV offering with about 1,000 customers in New Delhi, is also expected to launch the service in the first half of the year.